The McKenna Collins LLP public accounting firm employs 10 full-time professionals who provide services to clients. All professional labour compensation is traced directly to clients on a per professional labour-hour basis. Any other costs are included in a single indirect-cost pool (same as overhead) and allocated to individual clients according to billable professional labour-hours.Operating costs and data for the year included the following: estimated actual overhead (indirect) costs 1,000,000 1,200,000 number of billable professional labour-hours 40,000 50,000 total professional compensation 750,000 750,000 Required:a. By how much, if any, was the overhead cost underapplied or overapplied? b. Prepare a summary journal entry to close any underapplied or overapplied overhead cost to a Cost of Services Provided account. c. Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead cost.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
The McKenna Collins LLP public accounting firm employs 10 full-time professionals who provide services to clients. All professional labour compensation is traced directly to clients on a per professional labour-hour basis. Any other costs are included in a single indirect-cost pool (same as
Operating costs and data for the year included the following:
estimated actual
overhead (indirect) costs 1,000,000 1,200,000
number of billable professional labour-hours 40,000 50,000
total professional compensation 750,000 750,000
Required:
a. By how much, if any, was the overhead cost underapplied or overapplied?
b. Prepare a summary
c. Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead cost.
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